The Victorian premier, Daniel Andrews, has conceded that the business case and costings for the axed 2026 Commonwealth Games were “hardly the greatest piece of work” but declined to say if individuals from the various organisations involved in compiling the documents were working on other government projects.
The documents, released on Saturday after the government reached a $380m settlement with Commonwealth Games organisers to cancel the event, showed the cost of hosting the Games in regional centres blew out from an estimated $2.5bn in April 2022 to almost $7bn in July 2023.
The original business case also revealed an estimated benefit-cost ratio (BCR) of between 0.7 and 1.6, meaning for every dollar invested by the government it would receive a return of between 70c and $1.60.
Marion Terrill, the transport and cities program director at the Grattan Institute, has described the cost-benefit analysis as an early red flag that the event should not have proceeded.
“Any prudent government would focus on the worst-case number rather than the best-case number and the worst-case number tells you that this was not worth going ahead with,” Terrill told Guardian Australia.
“To proceed with a BCR of 0.7 would destroy value.”
The business case was prepared with input from the Department of Jobs, Precincts and Regions, Visit Victoria, the Department of Treasury and Finance and consultants EY, MI Associates and DHW Ludus.
Andrews described the documents on Tuesday as “hardly the greatest piece of work ever done”.
“That’s very, very clear because the estimates are a long way from what the costs were going to be,” he told reporters, adding they were being investigated by the state’s auditor general.
Andrews said he had “no idea” if those tasked with putting together the Commonwealth Games business case were working on other government projects.
“I’m not giving you the names of people who did the work. That’s not fair at all and there’s no need for me to do that because I’m accepting responsibility as the leader of the government,” he said.
“I’m not for a moment suggesting that people didn’t do their best. I’m not for a moment suggesting that every single thing that affected these costs was foreseeable and ought to have been included. That would be unfair to say.
“But in any event, we are in a situation where we either proceed and have to take money from hospitals and schools and heaven knows where else to run a $7bn 12-day sporting event or we have a year-long global legal action or we have a settlement and we close this matter. The third option is what we have delivered.”
The business case banked on the Games delivering wider economic benefits, including up to $38m worth of “civic pride”, $352m for “avoided health costs and reduced productivity costs from increased physical activity”, $97m for “consumer surplus” – when the cost of a product is lower than the consumer is willing to pay.
In addition, it assumed the Games would bring an extra 1 million tourists to regional Victoria between 2022 and 2030, injecting almost $600m into the state’s economy.
Deducted from the costs were up to $173m from state sport infrastructure funding and $161m from its housing program. Another $173m from the federal government and $16m from local governments were also deducted from the cost to the state.
According to the updated costings, there were about $2bn worth of unexpected costs related to the Games due to compressed timelines, supply constraints, accommodation shortfalls and major sports code displacement costs.
Additional reporting by Adeshola Ore
